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GE Sizes Up Gains From Being Green; Investors Hope It Works

by wchurchill Sun May 27th, 2007 at 09:15:21 PM EST

Venture capital has been investing heavily in developing new forms of energy over the last several years.  Now GE discusses their programs, but investors are looking for the results on the bottom line.  (Requires subscription, I think.)

The Fairfield, Conn. conglomerate says it's already reaping the benefits from a two-year push into energy-efficient equipment and technology. It reeled in $12 billion in sales last year of what it calls its ecomagination products, which include wind turbines, super-efficient jet engines and long-lasting light bulbs.

"Green is green," GE (GE) Chief Executive Jeff Immelt told an audience in Los Angeles. "This is about a hard-nosed business initiative," not a soft-touch to mollify critics chiding the company for its environmental policies, he added.

 Faster-growing units, such as GE's energy infrastructure practice, are hiring thousands of engineers and rolling out hundreds of new products, including the recent debut of a hybrid freight-train locomotive. Power-hungry China and India beckon.

The company's stock price has been a laggard over the last 5 years, and has still not hit it's pre-recession highs of 2000, in fact being 33% off of those highs, while other large companies in the Dow Jones have, on average, surpassed those marks.  As a result the company and its new CEO, successor to Jack Welch, are under some pressure to produce results, and one of their bets is on "green" and energy conservation.

Meanwhile, GE is intent on flagging its recent success in business lines that combine GE's established presence in heavy industry -- it ranks among the world's three biggest makers of commercial jet engines -- and the demands of energy conservation.

On Thursday it said sales of products that cut carbon emissions and energy generated $12 billion in revenue last year, about 7% of last year's total sales, up 20% from 2005.

Revenues from GE's ecomagination products could amount to 10% by the end of this year, McGarr predicts.

<snip>

The company, which has its hands in industries ranging from TV shows to credit cards, has focused a chunk of its research, hiring plans and executive talking points for the last two years on the belief there will be long-lasting demand for products that cut down on fossil fuel use and its harmful byproducts.

 "This is a game where the bets we're making are in the billions," John Krenicki, chief executive of GE Energy, said in an interview.

 By 2010, GE wants to make $20 billion in sales of energy-efficient, environmentally-friendly products and funnel $1.5 billion a year into related research.

<snip>

Krenicki's division has seen one market -- wind energy -- blossom since GE carved out a piece of it five years ago. Wind turbine sales will likely top $4 billion this year, and Krenicki said he expects those sales to increase about $1 billion a year for the next 10 years.

"We're very bullish on the capability of technology," he said in an interview.

GE is hiring thousands of engineers for Krenicki's 35,000-strong division. He said he hasn't seen the division running so hot since the late 1990's, when GE tapped into surging turbine demand at new natural gas-fired power plants.

<snip>

Continued success in the burgeoning clean-energy field hinges on whether public concern over climate change and soaring oil prices translate into public policy that rewards companies that cut down on fossil fuels and harmful emissions.

Building more wind farms, Krenicki noted, has long been tied to tax breaks and subsidies. But coal-fired power plants have been slow to install gasification technology to reduce emissions because it costs more and there is no national restriction on carbon dioxide emissions.

There are currently only two such plants, with seven in planning stages -- compared with more than 1,000 traditional coal-fired plants in the United States.

"Governments will have to step in and support the development of new technology," Krenicki said.

Not surprisingly, GE supports a national standard on carbon dioxide emissions.

Among other ventures, GE Thursday unveiled investments in hydroelectric power, wind farms and sale of light-emitting diode light bulbs that use much less energy than the incandescent bulb created by GE founder Thomas Edison.

Wal-Mart Stores Inc. said more than 500 of its U.S. stores will be using LEDs from GE to illuminate their refrigerated display cases.


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I've heard a couple of long radio interviews with the CEO of GE, Jeff Immelt. One was in the BBC program Global Business with Peter Day. He came across as intelligent, sympathetic and being genuinely concerned about changing energy infrastructure.

However I read the interesting trivia that he shared an office with Steve Ballmer (Microsoft CEO), at Procter & Gamble (Cincinnati, OH) where both of them started their careers. (wikipedia).

You can't be me, I'm taken

by Sven Triloqvist on Mon May 28th, 2007 at 02:22:42 AM EST
I know someone that knows him, and she says he is very competent and a great guy.  Here is his CV (scroll down a little), though it may be abbreviated, but it doesn't mention PG.  Ballmer's CV does mention PG.  Immelt is now, later in life, on the Board of Directors at PG.  That came up on a search of his name with PG.  So the honest answer is I don't know, but if I had to guess and bet, I would assume that Immelt went directly from his MBA to GE, as GE hires MBA's and loves to grow their people from the ground up, and they might have mentioned that in the abbreviated CV (though maybe not).  And his current Board seat at 50+, might on an Internet story be associated with Ballmer working there in his 20's.

But I'm just thinking through the people I have been associated with in my career, and thinking how I would be judged using the same type of comparison--I guess it's OK, except for that one guy who was an ax murderer.

by wchurchill on Mon May 28th, 2007 at 02:52:55 AM EST
[ Parent ]
I pointed out the trivial connection as evidence that the same backgrounds can produce very different executive appraoch and quality ;-)

You can't be me, I'm taken
by Sven Triloqvist on Mon May 28th, 2007 at 03:48:47 AM EST
[ Parent ]
and I'm still thinking through my executive style versus my former acquaintance the ax murderer.  :-)  I'm thinking I have gotten better results, but it may require consultation with the Tao and the I-Ching, which I'm afraid I'm becoming known for around here  :-)
by wchurchill on Mon May 28th, 2007 at 04:29:39 AM EST
[ Parent ]


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